Mining Sector (Anglo American)

Tuesday, 28th March 2017 10:25 - by Rajan Dhall

The mining sector has taken a massive hit at the start of the week with two key pressing macro issues to contend with.

 1) Reports of massive Iron Ore  stockpiles in China - This represents a problem for the sector in general as China is the biggest customer. BarCap sees more downside for the commodity, puts avg iron ore at USD 70/t in Q2 this year and if this is the case we could see a further sector decline. 

 2) Trump - Falling at the first hurdle with the repeal of 'Obamacare' has sent jitters through the financial markets. Equities fell in general off the back of the news that it may be harder than it seems to get budget reducing bills passed. Shares in construction and material names in the the US took a dive on the news late Friday evening. 

Looking across the miners in general BHP Billiton are worse off as they are the biggest producers of the material (Iron Ore). At some stage we should see some convergence, either with general shares falling or BHP moving back up inline with the rest of the pack.

 Anglo American's saving grace as the Co. is the world's largest producer of platinum, with around 40% of world output produced by the company, car sales have been steady if not on the up and this can only be bullish for the share price. I am looking for the trend to continue in this share. Although, there are some levels on the downside I would target first. Just because the  'Obamacare' repeal didn't work out it doesn't mean all the bills will fail and the infrastructure bill looks like it will have more support than some of the others. I have added a key level in the chart below that could be of significance in the future. If price breaks 1131.50 it would mean a technical break in trend as it would be the first lower high and lower low created outside the channel, but I would look at all these levels as shares could bounce back at lower values.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.